New Zealand voters ride `rock star` economy

With New Zealand`s economy finally humming after successive shocks from the global financial crisis and a devastating 2011 earthquake, Prime Minister John Key`s constant refrain ahead of Saturday`s election has been to keep the good times rolling.

Wellington: With New Zealand`s economy finally humming after successive shocks from the global financial crisis and a devastating 2011 earthquake, Prime Minister John Key`s constant refrain ahead of Saturday`s election has been to keep the good times rolling.

"I believe we`re on the cusp of something very special for this country," Key has repeatedly said during campaigning for the September 20 poll, in which he is seeking a third term after gaining office in 2008.

Raw data appears to bear out Key`s optimism, although critics say recent prosperity has not filtered down to society`s have-nots and the economy remains dangerously reliant on one key driver -- the dairy industry -- which accounts for 25 percent of exports.

The Reserve Bank of New Zealand estimates the economy will grow 3.7 percent in 2014. Budget figures say this should lift to 4.0 percent next year, while inflation in the year to June was a benign 1.6 percent, well within the central bank`s 1.0-3.0 percent target.

The government also posted its first budget surplus in six years in May, and says it has a plan to keep spiralling debt under control.

Crucially for many Kiwis, the economy is outperforming New Zealand`s dominant neighbour Australia, where growth has slowed as a lengthy resources boom comes to an end.

HSBC`s chief economist for Australasia Paul Bloxham has described New Zealand as "the rock star economy of 2014".

Small wonder then, that business leaders overwhelmingly support Key, with 97 percent of chief executives backing him and his centre-right National Party in a survey published in the New Zealand Herald.Key, 53, a former currency dealer with Merrill Lynch, is seen as part of the business community, while analysts say there are doubts about some of the policies adopted by the centre-left Labour party.

"A national government... is the most market-friendly outcome," said TD Securities analyst Annette Beacher, adding that "market uncertainty will dominate at the Monday (stock exchange) open with a Labour coalition victory".

Beacher said the concerns centred on Labour`s plan to extend the central bank`s mandate -- allowing it to consider factors such as the exchange rate and jobs when formulating policy, instead of limiting its role to containing inflation.

Other interventionist policies include setting up a centralised body to purchase power in a bid to keep electricity bills down, and restrictions on foreign land ownership.

Despite Key`s guru status on the markets, Labour has questioned whether growth is as robust as claimed, pointing to recent falls in export earnings from dairy and timber.

Party leader David Cunliffe argues many workers have not benefited from better wages in recent years.

"So we seem to have missed, for many people, the party. They`re going straight to the hangover," he said.

New Zealand Institute of Economic Research economist Shamubeel Yakub said one-off factors such as China`s demand for dairy products and an overheated Auckland housing market had driven growth, and there was no guarantee they would continue.

In addition, he said the statistics were skewed by a NZ$40 billion (US$32.8 billion) reconstruction programme following the 2011 Canterbury earthquake, which killed 185 people and flattened much of the South Island city of Christchurch.

He said the Canterbury rebuild showed up in accounts as growth, even though its purpose was to restore buildings and infrastructure that had been destroyed in the quake, reducing the economy`s productive capacity.

Without the earthquake programme, the economy`s performance was merely "OK", Yakub told broadcaster TV3. 

"For me the rebuild in Canterbury is not something you can count as a normal part of the economy -- we`re replacing something that was lost," he said.

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